Effect Of Credit Accessibility Through Savings And Credit Cooperatives On The Financial Performance Of Micro And Small Enterprises In Kiambu County: A Case Study Of Micro And Small Enterprises In Tai Savings And Credit Cooperative Society Limited

Abstract

Micro and Small Enterprises (MSEs) play a major role in economic development, particularly in Emerging Economies, such as Kenya. However, despite this pivotal role, most MSEs hardly survive due to lack of limited access to credit. This study was motivated by the difficulty faced by MSEs in accessing credit from financial institution to sustain business growth and financial performance. The purpose of the study was to establish the extent to which credit accessibility affected the financial performance of MSEs in Kiambu County using Tai SACCO Society Limited as the case study. The study was guided by the following objectives; to establish the effect of amount of credit to the financial performance of MSEs, to establish the effect of frequency of credit on the financial performance of MSEs and to establish the effect of credit terms on the financial performance of MSEs. The study was based on a descriptive survey design. Primary data was collected using face to face questionnaires to respondents who were owners/managers of the business while secondary data was from Tai SACCO loan records for year 2013 and other regulatory institutions. A sample size of 170 respondents was selected from a population of 850 MSEs using clustered random sampling method on the basis of the seven branches of Tai Sacco. Data was analyzed using SPSS version 20, Microsoft Excel and R studio. Regression analysis was carried out to establish the association among the variables. The results indicated a significant positive association of amount of credit and financial performance of MSEs while there existed a negative association between credit terms and frequency of credit on the financial performance of MSEs. Amount of credit contributed 3.25 % of the variance in financial performance in MSEs. Regression analysis revealed that frequency of credit contributed - 3.26% of the variance in financial performance of MSEs while credit terms contributed - 0.25% of the variance in financial performance of MSEs. In order to improve access to credit by MSEs, lending financial institutions need to adjust credit terms in line with what borrowers can afford.